A “deep cold storage” service for bitcoins underwritten by Lloyds
of London and offering protection from hackers and accidental loss has
launched in the UK

A “deep cold storage” service for bitcoins which promises to protect against hackers or accidental loss has launched in London.

Elliptic Vault claims to be the world’s first insured Bitcoin storage service, with Lloyds of London underwriting any loss or theft for a fee of around two per cent each year. Customers specify a limit to their cover in pounds, so if the value of bitcoins rises quickly against sterling they will need to raise their premiums.

The coins are not traded while in storage and due to the nature of the digital currency customers will have the unique ability to watch their money in plain sight. The value of every bitcoin wallet in the world is visible to anyone with an internet connection.

But those looking to remain anonymous will need to look elsewhere. Elliptic require photographic ID and proof of address before storing any bitcoins and their terms and conditions say they will cooperate with any national laws, opening the door to a situation in which the government could see who is storing bitcoins and their total value.

The company will accept clients from anywhere in the world, who can request that all or part of their holdings are moved to another wallet at any time.

Although the company keeps specific details of its storage secret they say that their system involves generating private keys – which are the unique codes which give access to bitcoin wallets – for each customer and storing them offline in multiple locations, protected by multiple layers of cryptography.

Marc Warne, the founder of UK-based bitcoin purchase site Bittylicious, said the move was great news for those with large holdings of the digital currency: "This will be a huge benefit to Bitcoin-related businesses attempting to decrease risk factors.

"Any such business that holds a significant amount of Bitcoins can keep a proportion in insured cold storage. This can reassure investors and lenders that in the event of a disaster, the business can continue to operate."

Elliptic claims to be acting as an advocate for the relatively new crypto-currency and says it is in talks with the UK government to shape a regulatory framework around bitcoin, which currently has an ambiguous standing in legal and accounting terms. It is also working on other services to "make it easier and more secure to acquire, use and store digital currencies".

Safely storing bitcoin is essential because there is no central authority to protect against fraud or recover lost private keys. Once a key has been lost then the bitcoins in its corresponding wallet are effectively destroyed, although they will remain in the public blockchain, unable to be accessed or transferred.

It is impossible to tell how many bitcoins have been lost in this way, although many early adopters gathered bitcoins soon after their launch in 2009 and forgot all about them until media coverage of its rocketing price last year. By this point many had thrown away old computers or reformatted hard disks and lost their private keys forever.